National Housing Law Project Housing Law Bulletin

House Introduces Low-Income Housing Program Changes

by Nancy T. Bernstine

Changing the nation's federal housing programs tops the agenda of Rep. Rick Lazio (NY), Chair of the House Banking Committee's Housing and Community Opportunity Subcommittee. Traditionally, housing authorization legislation is among the first introduced in a new Congress. In keeping with that practice, Rep. Lazio, on the first day of the first session of the 105th Congress, introduced H.R.2, the Housing Opportunity and Responsibility Act (HORA). The bill largely tracks H.R. 2406, the United States Housing Act of 1996, adopted by the House last year but never reconciled with the companion Senate bill, S. 1260 or enacted into law.¹ Hearings on H.R.2 have not yet been scheduled.

The new proposal retains last year's controversial approach of repealing in total the United States Housing Act of 1937, as amended. Few new ideas emerge other than the comprehensive housing block grant described below. For public housing, H.R.2 revives the idea of a capital and operating fund block grant that would be distributed to the housing authorities on a fiscal year basis. Formula allocations for the block grants would be developed through the negotiated rulemaking process submitted in a HUD to Congress within 12 months of the bill's enactment.²

General Provisions

Home Rule Flexible Grant Option

In addition to the public housing block grant, the measure borrows a radical departure from existing law that was also contained in this year's OMB proposal.³ The Home Rule Flexible Grant is a voluntary, single-formula block grant to localities. It would include not only public housing operating and modernization funds but tenant-based Section 8 rental assistance as well. Project-based assistance is specifically excluded.

With HUD's review and consent, jurisdictions could combine funding for up to five fiscal years to provide low-income housing, reduce homelessness and increase low-income homeownership.⁴ Some federal principles such as anti-discrimination, service to low-income families, housing quality standards and certificate/voucher portability would continue to apply. Jurisdictions would be barred from reducing the number of low-income families assisted. The proposal would require consistency between housing programs funded with the block grant and welfare programs operating in the jurisdiction.

Families currently served must continue to receive assistance and any rent increases must be phased in. Jurisdictions would be free to establish a system of preferences based on local housing needs and priorities. Each jurisdiction applying for a flexible grant would be required to submit a plan after public hearing, including consideration of comments of current and prospective affected residents.

Flexible Grant Plans would be submitted by participating jurisdictions for evaluation by HUD on the basis of performance criteria that measure success in moving families to self-sufficiency and in reducing both homelessness and the concentration of assisted families. An additional specific criterion to promote decreases in the per-family cost of providing assistance could fuel efforts to neglect the needs of the poorest families in order to stretch limited dollars over more households.

Resident Participation on PHA Boards

The proposal would require that each PHA governing board have at least one member who is an elected public housing resident. Agencies with combined responsibilities beyond the administration of public housing - such as community development agencies - are required to include residents only in an advisory capacity. Small PHAs as well as those with salaried, full-time directors, are also exempt from the requirement for resident membership.

Community Work Requirement

Among general provisions of HORA that were adopted last year by the House in H.R. 2406 is the requirement that each adult resident of public housing or Section 8 participant work eight hours monthly in a community program pursuant to an agreement with the PHA. This agreement would become a lease term, designed to foster resident economic self-sufficiency, and includes a target date "by which the family intends to graduate from or terminate tenancy in the assisted housing."⁵

Local Housing Management Plans

The proposal reintroduces five-year local housing management plans under which the PHA sets out its comprehensive goals and objectives along with projected needs assessments. A public hearing held at a location convenient to residents is a prerequisite of the plan's submission to HUD. Provision is also made for annual local housing management plans that would address a range of issues, including any strategy to convert public housing to vouchers. Local government authorities would have a 30-day period to comment on the plans, and HUD could review the plans at its discretion. HUD's failure to notify the PHA of any noncompliance within 75 days of receipt of the plan means the plan shall be deemed in compliance.⁶

The proposal continues to require that each PHA have an administrative grievance procedure for public housing although no similar requirement is imposed for "choice-based" (tenant-based) housing.⁷

Occupancy Standards

Resurrected from last year's debate is the provision, endorsed by powerful owner trade associations, regulating the number of persons who may occupy both federally assisted and private rental housing. State-established occupancy standards are presumptively reasonable, but where a state has not adopted such a standard, an owner may apply a standard of "two persons per bedroom plus infants."⁸ The criteria against which occupancy standards would be measured continue to be vague and susceptible to abuse.⁹ The occupancy provision carves out an exception for purposeful racial discrimination as well as nondiscrimination on the basis of handicap, in an effort to construe the statute consistently with City of Edmonds v. Oxford House in which the Supreme Court disallowed occupancy standards designed to prevent the operation of group homes for the disabled.¹⁰

The civil rights community, leading the opposition to occupancy standards last year, saw the standard as a pretext for discrimination against families with children in the face of shrinking availability of rental units large enough to accommodate such families.

Assistance to Non-Citizens

Equally troublesome are changes made related to Section 214 of the Housing and Community Development Act on the use of assisted housing by aliens. A recent HUD interim regulation offered guidance on changes to that provision made by the Immigration Reform Act. The interim regulation made it clear that, among other things, Congress authorized PHAs to elect not to comply with the non-citizen rule.¹¹ HORA would override that previous amendment and regulation by authorizing PHA non-compliance only with respect to admitting applicants before completing the verification process.

Public Housing

In the view of some, the 104th Congress failed to complete action on changing the public and assisted housing programs, at least in part, due to the repeal of the Brooke Amendment which limits tenant rents to 30 percent of a household's adjusted income. As originally introduced, H.R. 2406 would have repealed the Brooke Amendment completely. As ultimately adopted by the House, the measure would have preserved Brooke protections for tenants with incomes under 30 percent of area median, as well as for the elderly and disabled.

Late last summer, as preliminary staff-level discussions with the Senate (which had adopted a less radical measure) were underway in an effort to achieve compromise, Chairman Lazio proposed a compromise that would have offered each tenant family the choice of paying no more than 30 percent of its income as rent or paying a flat market rent, regardless of income, to be determined annually by the PHA for each unit.

HORA revives this flat-rent compromise which includes the statutory mandate that the rent structures not operate as a disincentive for employed families to remain in public housing. The flat rent cannot be higher than actual monthly operating costs, although this limitation is not intended to require establishment of a rent equal to or based on operating costs.¹² As an alternative to the flat rent, families could opt for "income-based rents," mirroring current law which caps rent at 30 percent of monthly adjusted income, 10 percent of monthly income or, where relevant, that portion of welfare payments designated for housing.¹³

H.R.2 would require a minimum rent of $25 to $50 at the discretion of the PHA, from which the PHA may grant a whole or partial exemption to current tenants due to severe financial hardship. The proposal provides as examples of severe financial hardship for currently housed families: (1) a family awaiting an eligibility determination for assistance; (2) a family that would face eviction as a result of the minimum rent; and (3) a family whose income has dropped as a result of changed circumstances, including loss of employment or other circumstances as determined by the PHA.¹⁴ As in current law, PHAs are required to conduct annual income reviews, except that families opting for flat rents will be reviewed less frequently, but not less than once every three years. The rationale for less frequent rent certifications for flat renters is to relieve the administrative burden on the PHA of annual certifications.

The bill would establish a mandatary offset from income for families who experience income increases as a result of employment of a member who had previously been unemployed for a year or more. Such families would be protected from rent increases for 18 months, commencing on the date of employment. Thereafter rent increases would be phased in over a three-year period.¹⁵ Rent increases of more than 30 percent for currently housed families would be phased in over three years, and would be limited to 10 percent per year for increases between 10 and 30 percent. Phasing in of increases would be inapplicable to minimum rents.

H.R.2 would authorize PHAs to use income-mix criteria on a development-by-development basis that limits admission so that the mix of tenant incomes within the development "at any time is proportional to the income mix in the eligible population of the jurisdiction." This provision reflects the "profile targeting" stance taken by the Council of Large Public Housing Authorities.¹⁶

H.R.2, like its predecessor H.R. 2406 in the 104th Congress, reserves 35 percent of public housing units for families with incomes at 30 percent of area median income and below. HUD is authorized to set higher or lower ceilings than 30 percent of median for areas where incomes are unusually high. Unlike H.R. 2406, H.R.2 provides that no authority is implied for the PHA to evict any family due to income or "any noncompliance or overcompliance with the requirement of this paragraph." PHA noncompliance with the requirements for income mix would be allowed if (1) such noncompliance were temporary due to increases in the incomes of existing residents and (2) all admissions during the temporary noncompliance were of families with incomes below 30 percent of area median.¹⁷ "Overcompliance" is not defined.

The proposal adds authorization for PHAs to establish procedures for maintaining waiting lists, including site-based waiting lists under which applicants may indicate the development for which they wish to be considered for occupancy.¹⁸

Designated Housing

Existing law requires that a determination to designate housing as elderly or disabled requires a showing that such designation is necessary to meet the requirements identified in the comprehensive Housing Affordability Strategy (CHAS), as well as the needs of low-income persons within the jurisdiction. The provision on designation of housing for elderly and disabled households has been changed from the language in H.R. 2406. The new proposal requires a showing under only one of these requirements.¹⁹ The concern is that the more specific needs of disabled persons identified in the CHAS could be disregarded.

Choice-Based Housing

Forty percent of the families receiving tenant-based assistance, so-called "choice-based housing," must have incomes at 30 percent of area median income and below, adjusted for family size. As with public housing, HUD has authority to vary the ceiling based on variations in family incomes in a particular area.²⁰

As with the public housing income-based rent structure, voucher recipients must have their income certified on an annual basis. PHAs would be able to establish preferences for this program based on local needs through the public hearing process prescribed for the local housing management plan or pursuant to the Comprehensive Housing Affordability Strategy (CHAS).²¹ Although choice-based rental assistance is supposedly fully portable, the originating PHA could require that the assistance be used within the jurisdiction during the 12 months following the date of initial receipt.

The family's monthly rent contribution would be the same as that for public housing families not opting for the flat rent. As with public housing, minimum rents of $25 to $50 are mandated. Housing authorities would be authorized to exercise the same hardship exemption as in the case of public housing, and rent increases as a result of additions to income would be phased in.²²

Applicable state or local law would govern any notice required for termination of tenancy.²³

Repeals and Related Provisions

H.R.2 provides that the United States Housing Act of 1937, as amended, is generally repealed, effective six months after the bill's enactment. However, HUD may delay, by notice no later than October 1, 1998, the effective date of any provision for which implementation would produce hardship. Under certain circumstances, the Secretary would also be authorized to enter into new obligations under the 1937 Act and, if necessary, issue regulations and other guidance as if that Act were in effect. HUD is instructed to submit to the House and Senate authorizing committees notice of delayed effective dates and regulations or other guidance issued under the United States Housing Act.

H.R.2 generally retains the effectiveness of the provisions of the United States Housing Act of 1937 with respect to Section 8 project-based assistance, with a few exceptions. Preferences are to be governed by those adopted by the public housing authority.²⁴

The measure contains a number of other specific repeals, including repeal of the provision of the FY 1996 Appropriations Act requiring mandatory conversion of certain public housing to vouchers.²⁵

Among the special issues addressed by H.R.2 are pet ownership in all federally assisted housing²⁶ and a review of drug elimination program contracts by HUD within six months of enactment, this last a likely response to controversy surrounding the award of such contracts to Nation of Islam entities. The current Public Housing Drug Elimination Program is replaced by one called Community Partnerships Against Crime which permits crime-prevention activities beyond drug-related crime and authorizes grants to private for-profit and non-profit operators of housing in addition to housing authorities.²⁷

A new subtitle is added to consolidate provisions related to the effect of criminal activity on occupancy in federally assisted housing. The provisions, in some respects, track revisions made by the Housing Opportunity Program Extension Act of 1996.²⁸

Prior law gave PHAs discretion to establish standards denying admission to households including any individual engaged in illegal use of drugs. HORA mandates that such standards be established to exclude households having a member who is currently using illegal drugs or for which the PHA has "reasonable cause to believe" that such use would interfere with other residents' health, safety or peaceful enjoyment.

PHAs would be able to consider whether household members have completed or are participating in "supervised" rehabilitation programs (current law requires that they be "accredited"). Every adult member of a household would have to provide the PHA written authorization to obtain records from law enforcement as a condition to admission. For obtaining records for non-public housing residents, the owner would be required to request the assistance of the PHA in which the housing is situated.

H.R.2 makes clear that prior or current illegal drug or alcohol use is not grounds for a disability for the purpose of gaining admission to federally assisted housing.²⁹ However, this provision cannot operate to deny the continued occupancy of those already housed.³⁰ PHAs and owners of federally assisted housing would be required to establish standards and lease provisions to evict or terminate the subsidy for households with a member engaged in illegal drug use or where such illegal use or abuse of alcohol is interfering with the other tenants' health, safety or the right to peaceful enjoyment.

The grounds for termination would reach beyond the acts of household members and would also apply to the conduct of guests or other persons under the control of any member of the household.³¹ Law enforcement personnel, including the National Crime Information Center, would be required to provide criminal conviction records for adult applicants and tenants to the PHA, but only upon request. Release of information regarding juvenile records is governed by applicable law. Information may be released only to a PHA or owner representative with a job-related need to know and HUD must provide rules to ensure confidentiality.

Tenants or applicants would continue to have an opportunity to dispute the accuracy and relevance of a criminal record prior to any adverse action. Owners would be required to pay PHA fees for assistance in providing information. Civil penalties of up to $5,000 would be available for knowing and willful improper disclosure. Finally, any applicant or tenant harmed as a result of negligent or willful disclosure may sue for damages in United States district court.

Legislation Affecting Homeless Persons

Rep. Lazio also introduced H.R. 217, the Homeless Housing Programs Consolidation and Flexibility Act, that would consolidate seven existing programs for homeless people. It would pass through 50 percent of federal homeless dollars to nonprofits and require extensive matching of federal dollars. The measure would authorize local communities to develop permanent housing for the homeless through acquisition, rehabilitation and new construction.

Hearings have not yet been scheduled on this measure.

¹For a description of some important provisions of H.R. 2406, see House Passes H.R. 2406 to Repeal the United States Housing Act, 26 HOUS. L. BULL. 71 (May 1996), and Emerging Legal Issues Regarding HUD's Housing Programs -- Part 2, 26 HOUS. L. BULL. 31, 32 (Mar. 1996).

²HORA, § 201.

³For a description of OMB's proposal, see OMB Delivers One-Two Punch to Low-Income Housing, 26 HOUS. L. BULL. 163 (Dec. 1996).

⁴HORA, § 401.

⁵Id. § 105.

⁶Id. §§ 106-108.

⁷Id. § 110.

⁸Id. § 702(c).

⁹"(i) Providing a decent home and services for each resident. (ii) Enhancing the livability of a dwelling for all residents including the dwelling for each particular resident. (iii) Avoiding undue physical deterioration of the dwelling and property." Id. § 702(d).

¹⁰115 S.Ct. 1776 (1995).

¹¹Interim Rule, "Revised Restrictions on Assistance to Noncitizens," 61 Fed. Reg. 60,535 (Nov. 29, 1996).

¹²HORA, § 225(b)(1).

¹³Id. § 225(b)(2).

¹⁴Id. §§ 225(c) and (d).

¹⁵Id. § 225(g).

¹⁶See CLPHA's Goals for the 105th Congress elsewhere in this issue.

¹⁷HORA, § 222(c)(2).

¹⁸Id. § 224(c).

¹⁹Id. § 227(d).

²⁰Id. § 321.

²¹See note 6, supra, for a description of the local housing management plan hearing process.

²²HORA, § 322(b).

²³Id. § 325.

²⁴Id. § 223.

²⁵See HUD Issues Implementing Notice for Public Housing Conversions -- Public Review and Comment Will Be Crucial, 26 HOUS. L. BULL. 137 (Oct. 1996), for a description of that legislation's mandatory "vouchering out" provision and HUD's initial steps to implement it.

²⁶HORA, § 108.

²⁷Id., § 624.

²⁸Pub. L. No. 104-120 (Mar. 28, 1996), § 9.

²⁹HORA, § 102.

³⁰Id. § 227.

³¹Id. § 643.